Insurance firms gear up to face impact

Insurance companies estimate huge loss on account of cover extended to socially disadvantaged people killed in the calamity.

Private insurance companies have set up mobile offices in south India to facilitate the registration of claims and making of on-account payments.

Public sector insurance companies have authorised their offices to treat the claims as individual claims and not as a catastrophe claim, which otherwise would need to be combined.

"This will help facilitate payment of claims," said senior officials at the New India Assurance Company.

Many private insurance companies like Bajaj Allianz, General Insurance and ICICI Lombard General Insurance have called up their respective customers to understand the degree of loss.

ICICI Lombard has set up nine mobile offices in the region and has also set up help-lines to facilitate registration of claims.

"We will make on-account payments to help our customers," said senior ICICI Lombard officials.

A majority of the losses would come as a result of loss of lives. Many insurers have sold personal accident policies for people below the poverty line to state governments of Andhra Pradesh, Tamil Nadu, Kerala and Chennai, among other affected areas in the south.

The New India Assurance has sold two policies covering about 500 fishermen, each for Rs 1 lakh, in Coimbatore, Tamil Nadu.

"We expect about 20 per cent death, and this would amount to about Rs 1 crore in claims from these policies alone," said senior company officials.

A few power plants in the region are expected to have been affected by flood waters, and this could also result in loss on account of business interruption.

One leading private insurance company estimated that its exposure to the calamity-stricken region could result in claims of the magnitude of Rs 35-50 crore.

Goods-in-transit at the Chennai port, as well as ships and barges in the area, and vehicles washed away in the flood waters, are the extent of exposure of many insurance companies.

"The reinsurance arran-gement in terms of catastrophe risks will help take care of the losses," said K Krishnamurthy, head underwriting, Bajaj Allianz .

The economic and insured losses are not expected to be as grave as they were in Gujarat after the 2001 earthquake although yesterday's quake measured 8.9 on the Richter scale.

In Gujarat, the economic loss exceeded Rs 5,000 crore. Over 3,000 claims were logged with insurance companies, each varying between Rs 10,000 and Rs 10 crore.

Insurers differ over definition

Economic losses triggered by the tsunami will not be covered unless property was insured against both earthquake and floods. There is discrepancy among insurance firms as to whether claims as a result of the tsunami would be covered under the standard fire policy.

"Chennai being a low earthquake zone and not prone to this risk, most customers do not opt to take earthquake cover," said K Krishnamurthy, head underwriting, Bajaj Allianz.

So any loss due to the present tsunami, which is said to have been caused by an after-effect of an earthquake, would be covered under fire policy only if earthquake extension has been given to the policy, he added.

A standard fire and special perils policy would cover loss, destruction or damage directly caused by storm, cyclone, typhoon, tempest, hurricane, tornado, and flood and inundation, but excluding those resulting from earthquake, volcanic eru-ption or other convulsions of nature. Earthquake cover is taken as an add-on cover.

Other firms, however, said while the damage to property has been caused on account of floods due to earthquake, under the earthquake peril cover, only fire and shocks are covered. Hence, loss covered by tidal waves are not covered.

"Most of our fire policies have built-in flood cover, and hence the loss on account of the tsunami will be covered. This is provided that customers have not sought to exclude storm, tempest, flood and inundation from the standard fire policy in order to save on premium charges," said a New India Assurance officials.